B&B drives further into buy-to-let mortgages

Bradford & Bingley, the mortgage lender, yesterday continued its push into the buy-to-let mortgage market, saying sales had grown strongly in the second half and its profits for the year would grow.

One in every two mortgages sold by the former building society is now in the buy-to-let sector, which is perceived as the risky end of the market as borrowers can end up without tenants for long periods and default on their payments. But B&B has been enjoying higher margins from this type of business, dubbed 'selective lending'.

Christopher Rodrigues, the chief executive, yesterday said default rates were lower than for standard mortgages, with only 32 repossessions in the 100,000 such loans it has sold over five years.

"New selective lending has continued to grow strongly and we approach 2004 with continuing strong demand in our core markets and healthy new business pipelines," he said.

"Credit quality across our loan books continues to be good. Consequently, we remain well provisioned and our second half provision charge will be low."

Mr Rodrigues predicts the mortgage market will remain strong in 2004, despite the pace of house price growth slowing to about 7 per cent. The boost will come mainly from remortgaging activity.

B&B also said yesterday that its estate agency business had picked up in the second half of the year, having ground to a halt during the Iraq war.

Mr Rodrigues said the company profits for the year would meet market expectations, which are forecast at £260m, up 8 per cent on last year.

B&B announced yesterday it had agreed to buy a further £1.4bn of mortgage portfolios from GMAC, part of the General Motors group, adding to the £1.4bn it bought earlier this year.